After the
Greater Toronto Area's record
year in 2015 for both the number of homes sold and the average
price, the question is: when will it all come crashing down? The answer: not in
2016. Here are five reasons why this won't be the year of Toronto's
housing collapse.

1. Supply and demand

It's the
simplest rule of market economics and it applies to Toronto's real-estate
market. The population keeps growing, and people have to live somewhere.

There's little
room to build more single-family houses to increase the supply. The
demand from families who want to live in the city with a patch of
grass remains huge. The number of new listings on the
market continues to be outstripped by the number of
buyers.

As for Toronto's condo
market, it's a myth that it's oversupplied: the inventory of unsold
condos is shrinking, and with first-time buyers nearly priced-out of the house
market, the demand for condos remains steady.

"I don't see
the market falling at all in 2016," said John Pasalis,
president of Realosophy, a Toronto real-estate firm. "We're getting
further into this imbalance where demand is exceeding the supply of houses
coming on the market."

"Usually when the market's
slowing down and prices fall, you can see signs of that well ahead of
time," Pasalis said in a phone interview. "When you look at the
momentum in Toronto's market, it's not going in that
direction."

2. It's the economy, stupid

If the economy shrinks, jobs
disappear and people are forced to sell their homes. Supply goes
up, demand is down, so prices drop. This has happened twice
in Toronto in the past 30 years: a quick dip in the 2008
recession, and a deep collapse in the early 1990s recession. There is
no recession on the horizon for the GTA in 2016.

"The fundamentals facing
Toronto's housing market are generally quite decent," said Robin
Wiebe, a senior economist with the Conference Board of Canada think-tank.
It forecasts economic growth of 2.8% for the metropolitan area in the
coming year and predicts employment will grow too.

Ontario's economic growth has
actually been rather sluggish the past six years, yet Toronto's house
prices have just kept soaring. The average sale price in 2015 was 64% higher
than in 2008. So even if the economy sputters, house prices are unlikely to
tank.

3. Mortgage rates will
rise, but gently

It's telling that the Royal
Bank's announcement that it will push some of its mortgage
rates up by just 0.10% on Friday actually qualifies as
news.

"It would take quite a
significant increase in mortgage rates to trigger a crash,"
said Sherry Cooper, chief economist at Dominion
Lending. "I don't think interest rates are going to rise
dramatically."

"We forecast interest rates
will be relatively benign through 2016," said
Wiebe. For Toronto's housing market to crash, "you'd
have to see a really large spike in interest rates or a really large drop in
employment," he said. "It always could happen but that's not
what us or anybody else frankly is expecting."

4. There is no 'bubble' to burst

You've heard it before: the bubble has got to burst. Investment expert Hilliard Macbeth predicted last spring that Canadian houses prices will crash by as much as 50%. David Madani, the Canadian chief economist of global forecasting firm Capital Economics, warned of a housing price slump back in 2011. He did it again in 2013. And he did it again last spring. Financial author Garth Turner has been predicting a crash steadily since 2009, when the market rebounded following the recession.

"Toronto's not a bubble by any definition," Pasalis said.

Wiebe described a bubble as "when people buy houses purely for speculative reasons, with the sole motive of making money." He said that's not what's driving Toronto's market now.

The time that Toronto's bubble truly burst was in the early 1990s. That followed a crazy period when the average house price doubled in just three years. GTA house prices have not risen at anywhere near that pace anytime in the past two decades.

5. Affordable housing options
remain

There's no question it's getting more
difficult to afford a house in Toronto, with prices rising so much faster than
incomes. But Wiebe points out the average price of a condo is roughly half
that of a single-detached house. "If somebody is looking for a single
detached home in the old city of Toronto, it's going to be expensive, but
that is not the only housing solution available."

"I don't
think we'll see a crash because the average household is still in good
financial shape," said Cooper. "Yes, it's true that debt-to-income
ratios have risen, but household wealth has increased more than household
debt."

"Most
people still want to own their own home," she added. "They may have
to have a much longer commute to work and live in much smaller space but I
don't think the basic psychology is going to change."

Cooper predicts
Toronto housing prices will rise in 2016, just more slowly than in
the past few years.

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